Sunday, August 22, 2010

Before approving a loan for closing, underwriters need to make sure the address that is on the sales contract is the correct address. If the address is incorrect, the sales contract will need to be amended to show the correct address, and that can cause unnecessary delays.

The address that shows on the title commitment is NOT the official address, so if for some reason you have the title commitment before writing the contract, you can't rely on that address.

Underwriters use the United States Postal Service Zip Code look-up web site to get the official addresses of properties.

Tuesday, August 17, 2010

Ever wonder how underwriters find out all the details about a buyer or a property? One of the greatest resources for an underwriter is the Public Records Online Directory. This web site is a portal to all the official Assessor's, Recorder's, and Treasurer's web sites.

Here are just a few of the things that can be found by using this site:

- assessed value- taxes- current owners' name and address- sales history- deed recording dates- zoning information- property type (end the confusion about whether a property is a condo or a townhouse)

When the web page opens, just click on the state, then the county, and then the link to the Assessor, Recorder, or Treasurer. If the link says "Go to Data Online" that means you will be able to access the information yourself. If the link says "Website Only" or "No Information Online", then you won't be able to get the information yourself, but you can call the phone number listed next to the link to get what you need.

We use this web site for every loan we originate, just so we'll know exactly what the underwriter is going to see when they start their research. It's much better to head off problems early in the game than to have a deal fall apart at the last minute.

Friday, August 13, 2010

You've finally gotten the short sale approval from the seller's lender, and they've given you 3 weeks to close. But the buyer's lender says they need 5 weeks to close.

How do you prevent this from happening? By being proactive.

Any good lender will get the loan file into underwriting as soon as a sales contract is signed. They won't wait until the short sale approval arrives. If things are done this way, the loan can already be approved except for the following:

-- Appraisal-- Any necessary updates to income and assets (most recent pay stubs and bank statements)

If that's all that the underwriter needs to see to issue the final approval, 3 weeks should be plenty of time to close.

Wednesday, August 11, 2010

The roll-out date for the change in FHA mortgage insurance premiums has been moved to October 4, 2010. The new mortgage insurance rates affect all loans that have the FHA case number issued on or after October 4, 2010.

See the previous post for the original announcement and how it will change monthly payments for FHA loans.

Monday, August 9, 2010

In a press release dated August 5, 2010, FHA Commissioner David Stevens announced that effective September 7, 2010, FHA intends to lower the up-front mortgage insurance premium from 2.25% to 1.00%.

At the same time, FHA will increase the monthly mortgage insurance premium from .55% to .90% for loans with less than 5% down, and to .85% for loans with 5% or more down.

Of course, everyone will go bananas when they hear this, so let's see what it really means before declaring that HUD is killing the real estate industry. Let's look at two examples of how the changes will affect the industry.

In our first example, we will assume the purchase price is $100,000, the down payment is the minimum 3.5%, and the interest rate is 5%. We will also assume that the borrower will finance the up-front mortgage insurance premium (because they almost always do).

Under the current mortgage insurance rules, the monthly payment for principal, interest, and mortgage insurance would be $573.62. Under the new rules, the principal, interest, and mortgage insurance would be $595.10.

That's an increase of $21.48.

In our second example, let's assume a purchase price of $200,000, a down payment of 3.5%, and an interest rate of 5%. Again, we will assume that the borrower will finance the up-front mortgage insurance premium.

Under the current mortgage insurance rules, the monthly payment for principal, interest, and mortgage insurance would be $1147.24. Under the new rules, the principal, interest, and mortgage insurance would be $1190.21.

That's an increase of $42.97.

Will either of those increases kill many deals? Probably not. Will they help to ensure that FHA will be able to continue its role of providing very stable, very low interest rate mortgages to borrowers who otherwise might not qualify for a loan? Absolutely.

Thursday, August 5, 2010

3% down payment mortgages from Fannie Mae are still available! They never went away!

They're called Flexible mortgages and the "flexible" part means that the 3% down payment can come from what Fannie Mae calls "flexible" sources. Gifts or loans from relatives are the two most common sources of flexible funds.

Here are some of the highlights of these loans:

- There are no income limits.- Down payment is only 3% of the purchase price.- There is no "up-front mortgage insurance premium" like there is with FHA loans. There is monthly mortgage insurance.- The down payment and closing costs can come from "flexible" sources: primarily gifts or loans from relatives.- They are for 1-unit primary residences only.- They are not only for first-time home buyers. As long as the property will be the buyer's primary residence, it doesn't matter if they own other property.- They are all underwritten using Fannie Mae's online underwriting system for quick approval decisions.- The seller can pay up to 3% of the purchase price towards the buyer's closing costs.

Tuesday, August 3, 2010

One of the most common questions we get asked is "What is the property tax credit and how is it calculated?"

Property taxes are paid in arrears in Colorado, meaning the property taxes for this year are paid to the county next year. If you buy a house on August 15, 2010, then the property taxes for all of 2010 will be due in 2011. But wait! You only lived in the house from August 15, 2010 until the end of the year - why should you have to pay the taxes for all of 2010? Well, you don't. That's where the property tax credit comes in.

At the closing, the seller will pay you one day's worth of property taxes from January 1 until the last day that they owned it - August 14. That's 7 1/2 months of taxes that get moved from the seller's account into the buyer's account.It doesn't matter when you close on your house - you will only pay property taxes for the time you owned it. As the year goes on, the property tax credit gets larger. For example, if you close on a house on January 2, you will only get 1 day of taxes from the seller. If you close on December 31, you will get an entire year of taxes from the seller (less the one day you lived in it - December 31). This is important to know if you are asking the seller to pay some of your closing costs.

If the closing costs are $5,000 and the property tax credit is $2,000, then the most you should ask the seller to pay is $3,000. You don't need all $5,000 from the seller, so don't ask for it. Instead, ask for $3,000 in closing costs and lower your offer price by $2,000. The seller will end up netting the exact same amount of money, and you will pay $2,000 less for the property. Both parties will be happy. If both parties are happy, you have a well-constructed sales contract.

One more reason why you need to get your home loan financing from people who understands everything there is to know about mortgages - people like The Mortgage Experts!

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